In his final message after more than eight years as chief executive officer of Qualcomm Inc. (QCOM), Paul Jacobs on March 4 gave employees shareholders what he called a “homework assignment.” “Send your Congress people your opinion that you’d like American companies to be able to bring offshore money back to the United States to either reinvest or return to shareholders”, said Jacobs, now executive chairman of the San Diego based chipmaker, which has $21.6 billion in overseas profits.

Paul could have said, “Go home and hug your wife and children” or “It’s been a pleasure being your CEO for 8 years and thank you for your work.” Or “tell your Congressman to raise the minimum wage” or “tell your Congressman to end homelessness now”, but, no, his solipsistic exhortation was all about making Qualcomm executives and shareholders (not employees mind you!) even richer than they already are.

Funny, you’d think he’d have made that request of the shareholders who have something to gain rather than the employees who do not.

What these tech companies actually do with their extra tax free money is not to create jobs, but to buy back their own stock thus driving up the price making it that much more lucrative when execs cash in their stock. Paul Jacobs, by the way, just cashed in 70,000 shares of Qualcomm stock on Monday, March 17th. The stock was sold at an average price of $76.79, for a total value of $5,375,300.00.

Just think how much more Paul Jacobs would have made if the government had actually allowed Qualcomm to repatriate their foreign profits tax free and then used the money to buy back stock and drive up the price. Such a shame.

Paul Jacobs has been fixated on this problem of getting Qualcomm’s money back into the US tax free for a number of years. According to a 2011 San Diego Union article: “There’s $1.4 trillion that U.S. companies have so-called offshore,” [Qualcomm CEO Paul] Jacobs said at the Qualcomm annual meeting. “So you think about that with respect to the size of the stimulus package. These are real numbers, and so getting that money back into the United States would be very valuable for the U.S. economy, of course. So we’ve been out talking about repatriation.”

The tax holiday of 2004 was called the American Jobs Creation Act. It created very few jobs and in retrospect turned out to be a total scam.

Various companies did bring $362 billion back into the US under the pretense that this money would be used to create jobs. But the majority of it did not go to building factories nor did it go to research. Instead corporations bought back their own stock giving a boon to shareholders and execs and created jobs overseas. It was actually responsible for destroying jobs. In a huge disconnect from Paul Jacobs’ purported good intentions about job creation in the US, Qualcomm announced in 2011 that it planned to invest $1 billion to build a massive manufacturing facility in Taiwan.

“Buried in the fine print of the Jobs Creation Act is a hard truth: companies were not obliged to spend one dollar on new hiring or expanding research. If that sounds to you like an action with all the significance of moving a dollar from your left pocket to your right, your assumption is correct. The way lobbyists wrote the bill, companies could use their tax savings for virtually anything company executives said contributed to a firm’s ability to retain workers and create jobs. In other words, creating jobs was not a requirement of the American Jobs Creation Act, while destroying jobs was an authorized purpose.” As Johnston states: “Perhaps the law should have been called the 2004 Destroy American Jobs Act.”

In 2013 US corporations’ cash abroad rose by $206 billion. They parked cash in Bermuda, the Cayman Islands, Ireland, Luxembourg, Switzerland, the Netherlands and whatever other jurisdictions had little or no taxes. According to Bloomberg, multinational companies ahave accumulated $2 Trillion outside the US. That’s up 11.8% from one year ago.

The top 15 companies now hold over $795 billion outside US. But in terms of cash held abroad, Qualcomm is a relative piker compared with Microsoft ($76.4 billion) and Apple ($54.4 billion). Qualcomm’s $21.6 billion held abroad is chump change compared to the big guys. These companies are deferring hundreds of billions in US taxes which could be used to rebuild infrastructure (thus creating jobs) or to invest in renewable energy sources (thus creating jobs). They are lobbying to end the system of paying tax when they repatriate profits altogether.

US companies owe taxes up to a 35 percent rate on profits they earn around the world. Whatever taxes they do pay in a foreign country are deducted from what they owe Uncle Sam. For instance, say they paid 5% taxes on their earnings in the Cayman Islands. Then they would owe Uncle Sam 30% if and when they repatriated that money to the US. But they don’t want to pay that. Instead they lobby the Federal government to let them repatriate the money tax free.

Here’s how the scam works. Corporations like Qualcomm set up subsidiaries in offshore jurisdictions with zero tax rates like Bermuda and the Cayman Islands. Then they transfer assets to those corporations. In Qualcomm’s case those assets are mainly “intellectual property” like patents. These are the kinds of assets that are very easy to transfer. They typically sell these assets to their subsidiary for a very low price. They can legitimately do this if profits have not started to really kick in like in the case of a new patent that hasn’t become a goldmine yet.

As profits from that patent start to come in, the parent US based corporation has to pay huge royalties to the offshore subsidiary for the use of its patents. Profits pile up offshore where they aren’t taxed while losses pile up onshore where they qualify for a tax deduction.

Qualcomm in its lobbying efforts has put its money where Paul Jacobs mouth is. According to OpenSecrets.org, Qualcomm spent $4,740,000 in 2012 and $6,620,000 in 2011 on lobbying. Qualcomm’s lobbying efforts have increased from a relatively modest $415,000 in 2000 to the neighborhood of $6 million a year (with the exception of 2012) starting in 2007.

In recent years Qualcomm has increased the number of properties owned or leased outside the United States from 70 to 99, according to documents filed with the Securities and Exchange Commission. Meanwhile, Qualcomm pared down its U.S. property holdings from 76 to 73. Qualcomm is one of the nation’s premier outsourcers and pioneered the practice of shipping work overseas.

Congress is balking at letting the Qualcomms, Apples and Microsofts of the world pull a second scam akin to the one they pulled in 2005. They know that the Jobs Creation Act did not create American jobs. Sure it enriched corporate CEOs and shareholders, but the only jobs created were in foreign countries. You know the old saying: “Fool me once, shame on you. Fool me – you can’t get fooled again.” Thank you, George W Bush for those words of wisdom.

Editor’s note: According to Bloomberg, Jacobs was addressing shareholders and not employees which makes sense as they stand to gain more from repatriating foreign cash than do employees. The author and editors regret this error.

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